Yellow, Fizzy, and Tasteless: Further Analysis of the Brewing War

I’ve received lots of responses to my previous post Wisconsin Craft Brewers Under Attack and decided I should post a follow-up to answer some questions and clarify some other aspects of my original post.

Aren’t They Exempt?

Ale Asylum Bedlam

One question I’ve heard a lot is “I’ve seen talk about breweries with production levels of under 300,000 barrels a year are exempt, isn’t this true?” From my interpretation (I am not a lawyer) it appears that there is one provision of the motion that allows for self distribution for those breweries under 300,000 bbls. However, as outlined in the proposal on page 4 near the bottom, in order to self distribute the brewer must:

[comply] with the requirements of laws governing restrictions on dealings between brewers brewpubs, wholesalers and relatilser and laws governing distribution restrictions on wholesalers, brewers, brewpubs, and out-of-state shippers, including those imposed on wholesalers.

This seems to say that the brewery must abide by the same requirements as a wholesaler in order to self distribute. That seems fair, until you take into account existing laws and other provisions outlined in this motion that govern wholesalers.

For example, this bill mandates that new wholesalers must establish “at least 25 retail licenses or to other wholesalers that do not have any direct or indirect interest in each other or in the wholesaler” before they can legally obtain a wholesalers license. The wording of the self-distribution provision doesn’t clarify if a brewery must also have 25 customers lined up before they are allowed to self distribute, but it’s a fair reading of the bill to assume that they would.

New Glarus Enigma

In addition, these self distribution provisions seem to mean that a brewery can opt to distribute their own beer while foregoing the wholesaler option in a territory. Currently breweries can maintain a relationship with a wholesaler in a territory, and do some limited self distribution when it makes sense. This allows the brewery to send most of their beer to market through the wholesaler but to self distribute as necessary. To self distribute under these proposed regulations, the brewery must wrestle away distribution rights from the current distributor, and behave like a wholesaler. This makes the barriers to self distribution too high for small breweries to actually take advantage.

Double Speak

The motion has a lot of double speak in it, there is a whole section devoted to making it look like the provisions will benefit small breweries, but in fact the section does the exact opposite.

On page six we can see this language:

Repeal the following current law provisions:

A brewer that, together with its brewer group, manufactures not more than 50,000 barrels of beer in a calendar year in any location may be issued a wholesalere’s license for wholesale premises located on brewery premises.

A brewer that together with its brewer group…

The key word in this language is repeal this is a list of rights that breweries currently have, that will be removed with passage of this motion. It’s easy to gloss over that one word, but that word is absolutely crucial to a correct understanding of the adverse effects laid forth in this motion.

Later in the document, page 7 paragraph 3 section c states:

“Instead, provide and an exemption from these provisions for small brewer sales to retailers and restaurants operated by a brewer.”

This language needs to be clarified. In its current syntax, it’s easy to say there’s an exemption here. However, nothing in this document explains/defines/clarifies what this exemption is. All we have is an indefinite article, “an exemption,” which tells us little. Also, one could easily interpret the sentence to mean the exemption only allows small brewers to sell to retailers and restaurants operated by a brewer. In other words, small brewers are not allowed to sell to establishments (retailers and restaurants) not operated by a brewer, basically, the majority of the marketplace.

Legislators Response

Upon sending an email to my representative, I got this response:

Mitchell,

We have recently gotten a few e-mails on this issue and here is what I know. I think that there may be some mis-information floating around but these are the facts.

GOP Sen. Glenn Grothman and Dem Sen. Bob Jauch were the only two members to vote against the motion that you reference that makes changes regarding the wholesale distribution of beer.

Among other things, the motion regarding three-tiered beer laws gives licensing authority over wholesalers for the sale of beer from premises to the state Department of Revenue. Currently, municipalities can issue the permits. Under the motion, people holding unexpired municipal wholesaler’s licenses prior to Jan. 1 must be treated as wholesalers holding valid licenses until Jan. 1, 2013, whereupon all municipal licenses will be voided.

The motion deletes a current provision that prohibits the consumption of beer on a wholesaler’s premises. The motion specifies that a wholesaler’s permit may not be issued to a person who holds a brewers permit. It also eliminates a grandfather provision that allows a person to hold a wholesaler’s license, a retail beer permit or license, an industrial beer permit, or a brewpub permit.

It also eliminates a provision that allows a brewer to hold a wholesaler’s license and a Class “B” license for on- or off-premises sales of beer. While a wholesaler is prohibited from holding a retail license, a wholesaler is allowed to sell or give beer to its employees under the motion.

Any wholesaler issued a retail license prior to Jan. 1, 2011 may continue to sell the beer at retails as permitted under the retail license. The motion eliminates the current fee for a municipal wholesaler’s license, but instead requires DOR to determine a beer wholesaler’s permit fee in an amount sufficient to fund one special agent position dedicated to alcohol and tobacco enforcement in an amount not to exceed $2,500 per year.

The motion also specifies that a wholesaler may not hold an ownership interest in any brewer unless that interest was established prior to the effective date of the bill.

Something to keep in mind also is that this legislation does not affect breweries that produce less than 300,000 barrels a year and, for to put this into perspective, New Glarus produced 92,000 in 2010. This legislation just keeps Anheuser-Busch from monopolizing the beer market in Wisconsin.

This motion passed 12-2 and I am not aware of nor do I anticipate any detrimental impact on small businesses but please let me know if you have a specific concern.

Hope this helps,

Chris

It’s clear that Rep. Kapenga is missing the true effects this legislation will have on small breweries. As I outlined in my previous post, and further explained in this one, there are very real consequences for these small brewers, and I haven’t covered every aspect of the motion.

We don’t have much time to fight back. The budget along with this motion is being pushed through at breakneck speeds, and we need your help to stop it. Keep up the pressure and please take action if you haven’t already. Again here are the steps you can take to support these small businesses:

Ask your favorite bars and restaurants to take down their MillerCoors taps.

These proposals, much like the beer produced by MillerCoors show the true nature of the international conglomerate brewer. One of the most special things about the craft beer industry is the spirit of collaboration that it enjoys. These little breweries, even though they are in competition with each other, also celebrate victories, and join forces for the good of the beer, and the beer drinker. The big brewers share no such comradeship and are out to be as vicious as possible to this new competition.

These provisions are evidence of MillerCoors’ fear of the rise of craft beer. They are doing anything they can to make competition more difficult for the little breweries and hiding behind campaign donations to influence the laws and drive small businesses out of their market. Everything about this MillerCoors legislation leaves a bad taste in my mouth, just like their beer.

-Cheers

Mitch Jurisch

I had help with interpreting the legislation and writing this post from a representative of a local brewery who chose to remain nameless to prevent a possible reprisal.